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Concerns over Persian Gulf escalation weigh on markets

A man walks past an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo Friday, June 14, 2019. Asian shares were mixed Friday as investors weighed a variety of factors, including suspected attacks on two oil tankers in the strategic Strait of Hormuz and lingering worries about trade conflict between the U.S. and China. (AP Photo/Eugene Hoshiko)

TOKYO -- Global shares mostly fell Friday as investors fretted over the mounting crisis in the Persian Gulf and lingering worries about trade conflict between the U.S. and China.

The U.S. has blamed the suspected attacks Thursday on two oil tankers near the strategic Strait of Hormuz on Iran and that has triggered the latest bout of selling in the markets with investors worry about a potential escalation. The key worry centres on the supply of oil -- one third of all oil traded by sea, which amounts to 20% of oil traded worldwide, passes through the strait.

The U.S. military on Friday released a video it said shows Iran's Revolutionary Guard removing an unexploded limpet mine from one of the oil tankers targeted near the Strait of Hormuz, suggesting the Islamic Republic sought to remove evidence of its involvement from the scene. Iran denies being involved.

"The attack on two oil tankers in the Gulf of Oman has raised the geopolitical temperature even further in the region, at a time when it is high already, given the strained relations between the U.S. and Iran," said Michael Hewson, chief market analyst at CMC Markets.

U.S. shares were set to drift lower after gains in energy and internet companies on Tuesday helped snap a two-day losing streak on Wall Street in a choppy week of trading. Future contracts for the Dow were down 0.2% to 26,075, while the same for the S&P 500 fell 0.3% to 2,890.

Investors have been searching for direction as they cautiously await any new developments in the trade war between the U.S. and China. Any continued escalation could crimp global economic growth and halt what is poised to be the longest economic expansion in U.S. history.

The market is also looking ahead to next week's meeting of policyholders of the U.S. Federal Reserve. Last week, Fed Chair Jerome Powell set off a market rally after he signalled that the central bank is willing to cut interest rates to help stabilize the economy if the trade war between Washington and Beijing starts to reduce growth.